The IRS doesn’t care how exciting your rodeo belt buckle is — they care whether you’re engaged in the activity with the actual intent to make a profit.
If it’s a business, losses are deductible.
If it’s a hobby, deductions are limited and can’t create a net loss against other income.
Key Test:
- Can you demonstrate a profit motive?
- The IRS presumes a profit motive exists if you make a profit in 3 out of 5 consecutive years (or 2 out of 7 for horse-related activities, including breeding, racing, and showing — and yes, rodeo counts if horses are integral to the activity).
Rodeo-Specific Ways to Show a Profit Motive
Here’s what a rodeo performer should document and structure:
- Businesslike Operations
- Keep separate bank accounts for rodeo income and expenses.
- Maintain books and records: track every rodeo entry fee, prize, sponsorship, travel cost, and horse expense.
- Keep a calendar of events showing competition dates, fees, and outcomes.
- Have a formal business plan with revenue goals, marketing strategies, and expense controls.
- Effort to Make a Profit
- Actively seek sponsorships or endorsements — logo patches, gear deals, trailer wraps.
- Enter events with meaningful prize potential, not just local jackpots.
- Adjust your approach if you’re losing — e.g., change horses, switch events, increase training.
- Time & Effort Devoted
- Show substantial time commitment beyond competition — horse training, conditioning, travel, marketing, and booking events.
- Document hours spent (a time log works here).
- Dependence on Income
- If winnings and related revenue are a meaningful part of your livelihood, it’s easier to argue this is a business.
- History of Profit
- Even small profits matter. If you can show a few winning years, the IRS presumes profit motive.
- For horse activities, you get a longer runway — 2 profitable years out of 7 still meets the presumption.
- Business Assets
- Your horse is considered a capital asset if bought for competition and breeding potential. Keep bills of sale, vet records, and proof of business use.
Deductible Rodeo Expenses (if Business Status Established)
If you qualify as a business:
- Entry fees
- Horse purchase price (depreciated unless under Section 179 rules and eligible)
- Feed, vet care, farrier
- Travel/lodging directly tied to events
- Trailer, tack, and gear (depreciated or expensed)
- Training costs
Pitfalls to Avoid
- Claiming full deductions in the first year without a plan — a red flag.
- Mixing personal and business expenses without separation.
- Failing to change your approach after multiple losing years.
Bottom Line
Yes — a rodeo competitor can deduct entry fees, horse expenses, and related costs within the hobby rules by making the rodeo operation pass IRS business tests.
The fastest way to get there:
- Treat it like a business from day one.
- Use the 2-out-of-7-year horse activity rule as your safe harbor.
- Keep clean, verifiable records.
Author: Mike DiSabatino is an Accountant, Tax Strategist, and CFO with 35 years of experience helping businesses and taxpayers across the country protect assets, minimize taxes, and drive growth. A former CPA and corporate CFO, Mike honed his instincts for quick thinking and precise execution on the racetrack—skills he now applies to crafting winning financial strategies. His track record blends high-speed decision-making with deep technical expertise, delivering results that keep his clients ahead in today’s fast-changing economic environment.